To Keep Required Insurance Affordable, Start With Price

It may not be the sexiest piece of last year's health overhaul law, but it's one that has given small businesses and insurers a lot of heartburn. What exactly should be required when it comes to benefits?

Starting in 2014, every health plan in the new marketplaces known as "exchanges" will have to provide a minimum package of "essential health benefits." A report just out from the Institute of Medicine has given federal officials a framework for coming up with that package, but it didn't provide specifics.

"I'm sure a lot of people were expecting to get a list," said Elizabeth McGlynn, a member of the IOM committee and head of the Kaiser Permanente Center for Effectiveness and Safety Research. "That was outside of our charge."

Still, the panel did provide a key piece of advice that has a lot of would-be critics breathing a sigh of relief. It says federal officials should start with a budget target to guide the creation of a minimum benefits package. The group chose the national average premium that would be paid by small employers in 2014 in the absence of the law.

The idea then is to move backward and see what benefits that premium can cover to keep the insurance package affordable. "When you think about trying to get under that price point, then you may have to make some tradeoffs," McGlynn says. That's particularly true because of the 10 categories of care the law requires the essential benefits package to include, several aren't typically offered by small employers. Those include habilitative services (which help people, usually with disabilities, acquire skills they currently lack), and mental health and substance-abuse treatment.

The IOM committee's emphasis on keeping the package affordable pleased both insurance and small-business groups — who will be among the major sellers and buyers in the new exchanges.

"With this thoughtful report, the IOM is urging policymakers to strike a balance between the affordability of coverage and the comprehensiveness of coverage," said Karen Ignagni, president and CEO of the health insurance trade group America's Health Insurance Plans in a statement. "We agree that this balance is critical to ensuring that individuals, working families and small employers can afford health insurance."

Amanda Austin of the National Federation of Independent Business called the report "encouraging," and "pretty thoughtful," though she added that the Department of Health and Human Services still has to do the heavy lifting of and in devising the plans.

Indeed, HHS Secretary Kathleen Sebelius issued her own statement on the report, saying she would its advice to hold "listening sessions" around the country to help people better decide what benefits they want included in the mandatory package.

"These conversations will help us ensure that every American can access quality, affordable health coverage they can rely on," Sebelius said. If nothing else, that would seem to suggest that a proposal from the department won't be coming anytime soon.